India: Regulator directs life insurers to provide mandatory benefit illustrations

| 01 Oct 2019

India's insurance regulator, the IRDAI, has directed that it is mandatory for life insurers to issue benefit illustrations at the point of sale.

This has been done in a bid to increase transparency and curb mis-selling of life insurance policies in the country.

The regulator has said that the benefit illustration also has to be signed by the policyholder and agent/insurer; made a part of the insurance policy; and contain an advisory/alert, warning about the non-guaranteed portion of the returns on the policy.

In the case of digital sales, all terms and conditions are to be displayed on the main screen, instead of being hidden behind hyperlinks.

According to the circular, life insurers must show the projected rate of return in their traditional insurance policy products (non-linked) as well as unit-linked insurance plan's benefit illustrations. The illustrations are to be based on two different assumed rates of return in accordance with a prescribed format.

The Appointed Actuary and the CEO / Principal Officer shall approve all illustrations. Further, the benefit illustrations shall be placed before the board of directors for information.

Compliance deadline

Insurance companies must comply with the above by 1 December 2019, reported The Economic Times, citing a circular issued on 26 September 2019 and addressed to the CEOs of life insurers.

The IRDAI had previously asked insurers to provide benefit illustrations but there was no deadline set for compliance. Consequently, most insurers did not comply with the directive.

Insurance policies issued under microinsurance regulations, Point of Sales (POS) guidelines and Common Service Centres regulations, are exceptions to the mandatory benefit illustration rules.


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